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Guest Post: Market Punditry As Astrology
Originally posted at Monty Pelerin's World blog,
Is recent market behavior the beginning of a market turndown? No one knows, although it is easy to find people providing “answers.” The value of these predictions approach those of astrologers and fortune-tellers. What follows are some thoughts regarding markets.
History and Markets
History is a summary of what historians consider relevant. Selectivity of a limited number of events is required. Behind these events are millions of other events and processes that must be ignored. Many of these are causal elements and not even known to the historian. What is reported is the outcome(s) of these complex interactions. Historians then focus on a few causes that rationalize the outcome(s). Often these are correlative; never do they fully explain the outcome they purport to. That is the nature of all history.
Discussing the performance of the stock market is an exercise in history. It is subject to similar simplification. At the end of each market day, analysts “explain” why the stock market went up or down. These explanations are more rationalizations than explanations. Stock market outcomes can never be explained in terms of one or two variables, regardless of how relevant they might appear to be or how enlightened the analyst sounds. Soundbites preclude more than a couple of variables. Yet complexity does not care about soundbites.
To retain the aura of “expert,” these self-professed gurus must provide short, pithy and incorrect answers. A truthful answer would go something like the following:
I have no idea why stocks went up or down today. Nor does anyone else. There are literally thousands (millions?) of variable affecting peoples’ decisions to buy or sell stocks. No one knows them all and no one knows how to measure or weight them on a particular day. The market went up (down) because more buyers (sellers) participated today.
On some days, one or two major news items may ostensibly move markets, but that doesn’t change the fact that numerous other variables also had impact.
Seasonality
The old Wall Street Advice of “sell in May and go away” proved to be correct, at least for the first half of June. The Dow and S&P 500 are nearly level, each down slightly from their May closes. The Dow is off more than 400 points from its intra-day high on May 28 and slightly more from its all-time May 22 high. This information reinforces the advice to sell in May, not necessarily at the end of May.
But, is this rule of thumb valid? A look at May closes since 2007 generally supports the market folklore of “going away.” Four of the six May closes were higher than the August closes. One of the exceptions was 2009 when markets were recovering from the 55% drop off their highs. The other was 2012 where the exception was not particularly notable.
One of the reasons attributed to slowdowns in summer was vacations. That reason, if ever valid, seems weak these days when people can trade at any time and from any place thanks to advances in the internet and telecommunications. Some argue that there are no more vacations in the sense that you are always available.
Seasonality is also attributed to the Fall. September and October are considered very dangerous months for stocks as they have produced the largest downdrafts. Again, the empirics are there, although there is no theory or rationale as to why that should be so.
Many people believe that seasonality can be used to trade properly. However, unless some causal relationship can be discovered, skepticism is probably warranted. Further, if enough people believe in seasonality, their actions should eliminate the phenomenon as they try to profit from it.
The Relevant Issue
As summer begins, markets have slowed as of mid-June. Is this the beginning of the summer doldrums? Is it the beginning of a severe market adjustment? Or is it just some of the irrelevant “noise” that accompanies markets? Frankly, there is no way to know. Anyone who claims otherwise is a fool or believes you are. Regardless of how smart we are or become, there are always complexities that we cannot understand. Markets happen to be one of these difficult (impossible?) to comprehend areas.
Markets seem dangerously overvalued with respect to underlying economic conditions. Are they pricing in a recovery that most of us don’t see? I don’t think so. There has been no economic recovery thus far and none appears to be in the offing. Even if this assessment is correct, it doesn’t provide actionable advice. It doesn’t provide guidance for market decisions.
Alan Greenspan, the so-called “Maestro,” used the term “irrationally exuberant” to describe the stock market in December of 1996 when the Dow was around 6,000. Greenspan’s characterization was massively mistaken, at least as a market prediction. The market continued to rise to almost 12,000 before a major correction in 2001. Greenspan was the Chairman of the Federal Reserve during this period, had access to massive databases, thousands of experts and actually managed the policy variables thought to be responsible for markets. Yet this man who was alluded to as a financial genius, appeared clueless in hindsight.
The point is that even if markets appear out of line with economic conditions, that doesn’t tell you when or whether they will correct. In Greenspan’s case, he was “wrong” by a factor of almost 6,000 Dow points and about five years in timing!
Markets seem to have the ability for, as John Maynard Keynes said, “remaining irrational longer than one can remain solvent.” It is with respect to this phenomenon that one should not try to outguess markets. Even if you are certain they are under or overvalued, they can become even more so and stay in that condition for a long time.
As someone who anticipates a major economic catastrophe ahead, I am especially cautious. However, no one truly knows whether we are in 1996 or early 2001. Greenspan’s irrational exuberance was correct by every objective measure save one - it was wrong by 5 years and a return of 100%.
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sheeple are sheeple
sheeple are sheeple...so why should it be
You and I should get along so awfully
So we're different colours
And we're different creeds
And different people have different needs
It's obvious you hate me
Though I've done nothing wrong
I never even met you
So what could I have done
"He who predicts the future, lies, even when he tells the truth." - Nasim Taleb (I Think?)
http://www.spiritoftruth.org/astrology.htm
Pick up any two newspapers and see if Astrologers agree.
the best astrological forecaster in my opinion is Manfred Zimmel www.amanita.at, always ranks top 5 in timer digest.
I have consulted a chickens guts, and stacked a little higher.
I consulted a chicken sandwich and now I'm no longer hungry
Derple post
I find it interesting, that even apparantly open minded people, will not believe thier own damn lying eyes.....they will STILL only believe something, when the government says so.
Conspiracy and other sites have been banging on about the NSA snooping on everyones calls for decades.......but people laughed, and called them tin foil hat wearing nutters........Yet, when a corportation or government stooge finally comes out and says it, then people suddenly believe.
What other "truths" are out in the open, yet people scoff and ridicule because thats what the TV tells them to do.............and they will do so, .........until Uncle Sam tells them it is ok to believe it.
I was reading about PROMIS and Echelon over 20 years ago.
I'm genuinely more scared now that, that is going to MSM. WHY?
The media are not only compliant, they are weapons used against us every day.
OK. Just click once genius.
What other "truths" are out in the open, yet people scoff and ridicule
look up in the sky...it's a bird, it's a plane, it's a "Con-trail"!
zomg, they even write books about this stuff, some are well-researched too!
'course, who reads books any more, and how often do folks look up from their hand-devices. . .
IMO... Being that the idea of a Fed 'taper' has been floated and widely disseminated, a non-Taper that keeps Fed buying at the status quo pace, will probably now be seen as an 'increase over expectations' and thus wildly bullish. In other words, wildly insane.
CNBC is running commercials for their "Seeking Alpha" conference with the new head of the Treasury Jack Lew as keynote speaker, so everything must be better and the recovery is here.
That, or the markets are a complete Ponzi scheme house of cards fueled by privatized gains/socialized losses and the death of the rule-of-law.
KEVIN HENRY AT THE CONTROLS......
Suckers gonna sucker
Since these fuckers worship at the altar of 'Satan',
Astrology isnt that wide of the mark of other things they may believe will destroy us that little bit quicker, like unicorns and faries and them things that hide under bridges, and that mythical of all beings that people have said couldnt exist and may be a figament of an over active thyroid gland, the mythical 'Krugman Beast'.
Fucking theatre of the absurd, or even the twilight zone spring to mind.
When i want to know what the market is doing i "use the force"
There are no markets, there is only the Bernank. The little bit that remains of the markets will bend to the printing press of the Bernank until the world finally says enough!
Gatsby-Style U.S. Weddings Show Confidence to Spend Big
Bloomberg.
We never learn!
excellent use of bait 'n' switch with the headline there Tylers - absolutely zero use of "astrology" in the article itself. . .
"astrology" begins with a chart that requires a location, an exact date and time - then one uses MATH & GEOMETRY to observe the relationships between the planets (45dg = a square/tension, etc.)
the planets themselves have assigned archetypes (as above, so below), and it comes down the individual astrologer's belief system to do the interpretation of the relationship between the planet symbols, which is why you would be well advised to seek an astrologer with beliefs similar to your own
y'know, it's rather like market pundits - some "believe" wildly differing methods, based on CHARTS & stats, and their interpretations of any given piece of "market" information can vary widely, yes?
just because some people use the astrologer tag doesn't make ALL astrologers "psychics" - and not everyone who reads an "economic" chart is Cramer. . .
quite a few financial advisors use astrology, *nods*
How can you not believe in astrology after a look at these famous leo statists:
Barak Obama
Bill Clinton
Fidel Castro
Benito Moussolini
Napoleon
clinton had a thing for big hair
look for the sneaky Scorpios, they seek control, power over, and like to subvert from behind the scenes, aligning themselves with others/systems. . .
Billy Gates
Joe Biden
Hillary Clinton
Laura Bush
Mamie Eisenhower
Condoleeza Rice
Christopher Columbus
Marie Antoinette
I'm waiting on what Sybil The Soothsayer has to comment. She's really networked (ugh, sorry for the bad pun but had to use it).
so, you want some astrology... "The keyword of this transit is “downfall”. Of this transit Donald Bradley says “a real throne-toppler, this” and perhaps this aspect is directly indicative of what Webster Tarpley has referred to as the “post-modern coup”. The planetary complexes do not bode well for Obama himself, who may find himself unable to govern in the midst of an ever increasing chaotic and anarchic situation, and may well be removed himself at some pre-determined point. There are certainly some strong indications of possible treachery emanating from unknown quarters as often it is the fate of the Neptunian dominated soul to become the very victim of the machinations which he himself thinks he is enacting but which in reality are just part of a complex web of events spun into motion by the shadowy and ruthless cabal with which the unwitting dupe is entangled. The presence of such planets as Mars-Pluto astraddle the eighth house is certainly not a very reassuring feature and may be indicative of underworld forces, which suddenly emerge from the shadows and make their presence known with dark, violent, and brutal finality." August 2009
http://kushmonster.blogspot.com/2011/02/in-honor-of-hundredth-birthday-o...
Market pundits don't use astrology they use Elliot waves and Fibbonacci numbers lol. Or what some cab driver said on the way to the studio.
Then again maybe Greenspan lied and him and his buddies all rode the wave to 12k.
From Arch Crawford's email of May 30th.
BRADLEY MODEL PEAK APPROACHES
The high for this year in the Bradley Model occurs on June 7, after which the remainder of the year is anticipated to be trending lower as planetary aspect power recedes. Donald Bradley wrote Stock Market Prediction in 1947 which documents a methodology for combining the aspect power of 2-planet pairs for projecting trends into the future. All but 2 of the input data are Geocentric Longitude differentials. It does NOT include Lunar Cycles or Eclipses, declinations (north/south positional data) except for Mars & Venus, or Heliocentric positions. It is accurate often enough that one MUST be familiar with it and keep an eye on it, but can be erratic or useless under influences not included or when there are major multi-planet configurations which become unique events not easily codified or standardized.
In years when it is accurate, it is often amazinly so, calling some important tops and bottoms TO THE DAY! As with all methodologies, backup confirmation by standard technical data output means is always appropriate. A foolish trade on a favorable planetary aspect is still a foolish act, and A fool and his money are soon parted! We also believe that money management and risk management are as important as market prediction in the overall investment milieu.